What investment banker
Catherine Austin Fitts invariably emphasizes in her
discussion of global money flows is the extent to which
criminal proceeds play a part in the real world economy.
This should come as no surprise to anyone. Not after all
America watched their pension funds stripped away, while
dot­com CEO's pocketed millions of dollars in profits from
stock market "pump­and­dump'' schemes. Not after energy
traders like Enron, Dynergy, and Reliant have been accused
of using the California energy crisis to manipulate the
market, causing vicious price hikes, rolling browns out and
power shortages. No. In this past year, our naiveté and
trust in Wall Street, perhaps the world in general, has
collapsed much like the World Trade Center did that fateful
September morning.

The world really isn't any different,
it's just that some of the veils have been shorn away, and
long­time Wall Street insider Fitts figures there's no sense
pretending innocence any longer. Tax evasion, insider
trading, drugs sales, black budgets, and terrorism are a
significant part of global economic dynamics. It's simply
how the money works in a financial system where so-called
creative accounting methods are as transparent as mud and
money laundering is part of the quantum mechanics of
financial law. "The Real Deal,'' as Fitts refers to her
straight­on analysis of money flows, "is that financial
fraud, in all its wide variety of deceits, is the most
profitable business on the planet today.'' Based on her
eleven years experience on Wall Street and eight working
with federal agencies cleaning up HUD and several large
banking scandals, my guess is that Ms. Fitts knows what
she's talking about.

The United States Department of
Justice estimates that $500 billion to $1 trillion in
criminal proceeds are laundered annually worldwide. It may
be twice that. And the Real Deal is you can't do accurate
economics if this isn't accounted for. Sums this
large---hundreds of billions of dollars, says Fitts, can
only be laundered into the system through Wall Street and
the central banking system. Companies like WorldCom, Tyco,
and Global Crossing. Banks like Citigroup, JP

IMAGE: This is not Paul
Volcker

Morgan­Chase and the New York
Fed. This isn't wild talk. We've heard it all in the
unraveling of the Enron web already. The largest banks do
the largest business transactions and they are the only ones
capable of disguising the underside of these vast financial
flows. This is curious and profound commentary from a former
Managing Director and board member for the elite New York
investment firm Dillon Read, Inc. and onetime Assistant
Secretary of HUD. When she looks at the Enron bankruptcy,
with her BCCI and S&L clean­up experiences to draw upon, she
aptly quotes Yogi Berra, not Paul Volcker, to describe what
she sees: "It's déjà vu all over again.''

Catherine
Austin Fitts began her career in 1978 at Dillon Read in
corporate finance and mergers and acquisitions. Eight years
later she became the firm's first woman Managing Director
and board member. Her success raising capital for the
renovation of New York's subway system, City University of
New York, and several other major projects prompted Business
Week to refer to her as a "Wonder Woman'' and generated a
reputation in financial circles that she could fix anything.

Fitts left Dillon Read in 1989 to join the first Bush
Administration, working as Assistant Secretary to Jack Kemp
at the Department of Housing and Urban Development with the
task of "fixing'' HUD and the Federal Housing Administration
and cleaning up the S&L scandals. In 1990, she was named to
the Securities and Exchange Commission's Emerging Market
Advisory Committee. A year later, President Clinton's
Treasury Secretary Nicolas Brady and Chief of Staff John
Sununu, asked her to be a governor on the Federal Reserve
Board and a member of the board of Sallie Mae. This was
heady stuff for a woman of forty. But she'd already started
her own investment bank and software firm, Hamilton
Securities Group, Inc and turned down the Federal Reserve
offer.

In 1993, Hamilton Securities, Inc successfully won
a competitive contract bid with HUD to re­engineer portions
of its $500 billion portfolio of mortgage insurance,
mortgages, and properties. While fulfilling its contract,
repackaging and auctioning off $10 billion of defaulted FHA
loans, Hamilton developed a package of software tools to
access publicly available online government financial
records. This included an online disclosure and bid
optimization system for the sale of defaulted HUD loans and
an easy­to­operate program called Community Wizard, which
allowed local users to create "place­based'' data bases to
track government money flows and facilitate business in
their own neighborhoods.

IMAGE: Community
Wizard

Hamilton's efforts and loan sales
software would save the FHA funds billions of dollars and
earned Vice-President Al Gore's Hammer Award for
re­engineering government. Also Community Wizard, perhaps
Hamilton's most powerful innovation, became the central
piece in prototyping a computer­learning center and data
processing service in the Edgewood Terrace apartment
building, as part of Fitts' idea to move neighborhoods from
government subsidy to entrepreneurial business through
private markets and investment. Following her very
successful career line, Fitts again was a shining light in
the dark world of federal credit and balance sheets.

An
unforeseen side­effect of online tools like Community
Wizard, however, was that while clearly showing how clean
money worked in neighborhoods, the software also showed how
the dirty money worked, inadvertently, providing a checks
and balances for the use of federal housing monies. Certain
HUD problems became more visible. This included suspicious
patterns of high HUD mortgage defaults in the same areas
that were the target of CIA complicit narcotics trafficking
con­ firmed by CIA Inspector General investigations into the
so called "Dark Alliance'' allegations published by Gary
Webb and the San Jose Mercury News in the summer of 1996.
"These are the types of HUD mortgage scam that have been
popularized by The Soprano TV show," says Fitts, "and were
instrumental in combination with narcotics trafficking with
destroying my childhood neighborhood." The detailed
"place­based'' data provided the basis to estimate who had
been getting inside sweetheart deals or where fraud was
indicated. There were also many discrepancies in HUD's
books---later it became apparent that they ran into the tens
of billions of dollars.

Housing corruption: reality
TV?

Bada
bing! Tony Soprano reinvents government,
HUD­styleJames Gandolfini as Tony Soprano,
center, with Steven Van Zandt as Silvio Dante, left, and
Tony Sirico as Paulie Walnuts in HBO's hit television
series, 'The Sopranos' Dec. 10 ­ Credit Tony Soprano
with doing something no one for the past 37 years has been
able to do. He's taught millions of Americans that there is
a federal Department of Housing and Urban Development. And
he's shown how you can use it.

In Tony Soprano's mob
world, HUD exists to facilitate embezzlement, theft, and
extortion. Of course, this isn't what Congress intended when
it passed the Department of Housing and Urban Development
Act of 1965.

**** # # # ****

The next thing Fitts knew she was under investigation by
the DOJ, FBI, and the HUD Inspector General in response to a
series of law suits filed by a HUD contractor Ervin
Associates whose servicing contracts and responsibilities
doing defaulted mortgage workouts had been displaced by
Hamilton's loans sales auctions. This began a process of
eighteen audits, investigations and inquiries as well as a
smear campaign to discredit Fitts personally and
professionally. For all its benefit to accounting clarity
and the efforts of honest people, Community Wizard's open
window to federal money and credit was not what the
politically inbred contractor fraternity wanted.

Seven
years and all hell to pay later---she compares her life
during this period to that of the character played by Will
Smith in the movie Enemy of the State---Fitts and Hamilton
Securities, Inc emerged entirely exonerated from all
allegations of wrong­doing.

IMAGE: Enemy Of The
State

More than that, it was proven she
had done a lot of good for the taxpayers and communities. In
these times, when honesty and accountability must be held at
a premium, Fitts' bold revelations into the holes in HUD's
books and several other federal agencies, as well as her
insights into the relationships between government and
banking syndicates, have made her more respected in serious
financial circles than ever before.

Today Catherine
Austin Fitts is Solari, Inc, a pioneering investment
advisory firm aimed at bringing the power of investment
databases and equity finance to neighborhoods. That is,
she's out there with a positive vision, offering to all
communities what she prototyped at Edgewood Terrace in 1994.
Make no mistake about it. Fitts is all Wall Street
experience and straight-ahead common sense. She minces no
words bringing transparency to the now one-year­old Enron
fiasco. "I will bet the last dollar I have that Enron was
part of the largest laundromat of stolen and tax evading
dollars in American history and that the Department of
Justice's primary goal is cover-up.'' And, as the following
interview will attest, she's seen enough in her time to lay
out a pretty convincing
case.

The Solari Report's mission is to help you build wealth in ways that build real wealth in the wider economy. We believe that personal and family wealth is a critical ingredient of both individual freedom and community health and wealth.

CONTACT CATHERINE AUSTIN FITTS

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